The Devil's Excrement

I don’t know if I have been distracted lately or if I was just not paying attention. I have been hearing for weeks about the problems with shortages of diapers and sanitary napkins (an almost daily topic of discussion by the women in my office), but to tell you the truth, I was stunned when I went to the supermarket on Tuesday and saw all the empty or semi-empty shelves. Thinking that it was just coincidental, maybe the shelves had not been replenished from the weekend, I thought by today things would go back to normal.

No such luck, the shelves looked even worse. On the left you can see the paper products shelf, looking truly empty, only one brand of diapers available. On the right, the ready-cut  meat shelves looked depressingly empty:

On the left below, the vegetable oil shelf. It may look full at first sight, but when you look closer you realize there is only one brand today and a sign that says: “Limit one bottle per costumer”. On the right the cleaning products section also looked somewhat desertic and once again, for many products you could only find a single brand.

On the left below, a “good” shelf, that one with grains and imported can goods, lots of soy sauce and olives have reappeared on the shelves, something I had noticed was getting scarce. I guess Sushi and Gran Martinis’s can still be made. On the right, about the only healthy looking area: That of fruits, vegetables and greens. Most of this stuff is produced locally and not subject to price controls, therefore you can find plenty of almost everything, another example of supply and demand and market forces at work. Of course, these products rose in price in triple digits in 2010 as reported by the Island Canuck Index earlier.

And just as I left and was paying (No Coke in cans, but that is another story), I was greeted by this happy sign at the cashier: “Two kilos of powdered milk per person”:

How there can be shortages of a product I despise, is difficult to comprehend.

The pretty revolution at work!

This week we saw a new way in which Chavez imposes his power in order to interfere with the will of the voters, restricting democracy.

-First, Chavez picked single handedly his own choice for Governor of Apure in 2004 and 2008 in the person of Captain Jesus Aguilarte Gamez.

-Gamez turns out to be a so so Governor, somewhat corrupt, despite this Chavez hand picks him for a second term in 2008, his wedding last Fall is known as the wedding of the century now, Chavez turns against him publicly a couple of weeks ago, asking for his resignation “in the name of unity”

-Chavez names former Vice President Carrizales as “Executive Secretary” of Apure State, to watch over Aguilarte Gamez.

-Aguilarte refuses to resign until who knows how he was threatened and yesterday he quit, arguing “health reasons”  Carrizales temporarily replaces him as Governor. (Curiously, Carrizales resigned as Vice-President also arguing health reasons, good to see he has recovered fully)

I wonder what Apure voters think of Chavez-style democracy, where he gets this weird veto power over the voters wishes. I wonder if the outgoing Governor will ever be charged for anything. I wonder if the Comptroller will ban him from running for office.

I wonder how Chavez will restrict democracy further in the future.

In the 1980’s phone service in Venezuela was the pits. It got to the point that to get a call through, you had to try two or three times before you even got a dial tone. If your phone stopped working, sometimes you had to wait months before the line was fixed. If you had no phone, you had to wait sometimes years before you got service.

Then in 1991, the company was privatized, part of it sold to GTE, later taken over by Verizon, and the service started improving.I still recall the night of Chavez’ coup in 1992, I connected to the Internet to a network of Venezuelans on then nascent Internet called Atarraya and stayed connected all night. I was afraid that if I disconnected my modem, I would not be able to get a dial tone again.

The arrival of cell phones helped, the company go a new revenue stream, which it used to fix up the system. Then the Internet came, first dial=up and later DSL, called ABA here, another new strong revenue stream for a company which now even had competition.  In 1997 the remainder shares of CANTV were sold to the public, both in Venezuela and abroad and the company’s stock listed in the New York Stock Exchange. By the time Chavez arrived in power, the company gave good service and was profitable.

In late 2006, Mexican Carlos Slim tried to take over the company for $21 a share. As the regulator considered the tender, Hugo Chavez feeling like the rich Dictator of Venezuela ordered that the Government buy the company. Rather than spend the money on housing or hospitals, Chavez spent two billion US$ buying the company to satisfy his unlimited desire for power. Amazingly, he offered $17.6 per share, less than what Slim was offering, and one investment fund in the US, Brandes, still has an arbitration case pending because of this at the World Bank.

Move forward three years later after the nationalization and we have come full circle. After only three years, CANTV’s service has begun deteriorating. My own phone stopped working about two or three weeks ago and every time I report it, I am told about a different date for my line to be back. Right now the target date is February 18th. , making it sound like the old CANTV. I am not alone, I have heard lots of people facing similar problems for the first time in a decade and  half. (I ahve asked that I don’t be charged the service for all this time and have yet to find a way to ahve this done at CANTV)

While I have no voice line, I still have DSL, which is a little surprising, I thought it came over the same pair of copper wires. Except that it seems as if it gets worse every day. Right now for example, this is what I get if I do a speed test at speedtest.net:

This is actually much better than it has been in the last three days. Of course, it is abominable service, I pay for over triple that download speed and the upload speed is just laughable. In fact, the post is likely to take a while to upload, so instead of saving the draft as I write and correct, I am copying it so as not to lose my work.

Yesterday the service got even worse, my download speed was about 20% of that above, but I learned from Twitter that this was generalized. I was unable to read El Universal last night and the New York Times page took forever to download. I did manage to read it only once. People in Twitter reported all sorts of different problems, depending on where they were.

But as local newspaper El Nacional reported this problem, the Government’s attitude was to deny this was happening. It got so laughable that a former Minister of Telecommunications denied this was taking place, not only denying that the problem existed, but assertively saying that this was a media campaign to manipulate opinion on internet services in Venezuela. He even went further, specifically blaming Alberto Ravell, formerly of Globovision for the campaign, saying:

“Ravell is mounting a campaign of manipulation on the internet services, launching rumors to measure the reaction to them”

Curiously, CANTV reported today that the problem had been fixed in a press release, saying that it was found at one of the distribution points for the DSL service in the country.Only two or three times in the last four years has Internet service suffered like this.

We truly have come full circle under Chavez. A service we had taken for granted like telecommunications, has now gone the same route as water, electricity, infrastructure. Much like the Government does with everything, the solution is to distract, deny, escape responsibility. Billions of dollars wasted in buying out companies only to later run them into the ground, wasting precious funds that could be used to solve the myriad of problems that people face, from infrastructure, to health, to poverty, to education.

It is just another step in the destruction of the country’s infrastructure by the revolution, as the Chief Terminator moves on to other problems he has ignored for the last twelve years. Unfortunately, this will be more work (and money!) whenever the reconstruction of the country begins anew or will become another promise by Chavez, if he stays in power, the day the CANTV problem becomes so general, that people begin to complain massively.

It’s happened before in the pretty revolution…

Chavismo has an incredible ability to come up with creative new ideas. These guys, who never seem to be able to complete a project or even manage one, seem to always be thinking of new imaginative ways to screw up the country.

The latest one s a report that the Cabinet is thinking of imposing a salary cap on private sector salaries. Your immediate thought is that this is once again a measure to make us all poor, rather than having all of us be well off, that is how socialism works., no?

Well, you are wrong. This has nothing to do with narrowing the gap between rich and poor (funny how they always want the upper layers to come down, no?). Nope. The idea has nothing to do with equality, or with narrowing down the difference between rich and poor. It is actually qute clever. The objective is… (drum roll)

To lower inflationary pressures!

You see, despite what that dead guy with the Nobel prize from the University of Chicago said, Chavismo does not buy this monetary explanation.  They like their explanation better, obviosuly there is inflation because wealthy people have more money (Even if there are few wealthy people and lots of poor ones), not because Chavez increased the money supply in eight years by a factor of 15.(Do these guys ever stop to think about what they are saying?)

But think about it. Capping salaries in the private sector will affect only a small amount of salaries, no? If everyone is as poor as Chavez says, and there are so few noisy, capitalistic oligarchs, then it is those salaries that will be capped and according to Chavista lore there are few people in this category, no?

But then, of course, some Chavistas think they are smarter or more knowledgeable than others. While Chavista Deputy Sanguino, President of the Finance Committee of the National Assemby thinks it is a very interesting idea in terms of fighting inflation, the VP of the same Committee is not so sure. He thinks that the inflation problem can be solved by stopping speculation, thus, says Deputy Farias, we have to concentrate in the Anti-Monopoly laws. He also thinks that being underdeveloped has a lot to do with inflation, but apparently he has no clue on how to get us out of that, so he will concentrate in the first law.

Meanwhile, the Devil sits here in his ignorance wondering what part of:

“Inflation is a monetary phenomenon”, these guys did not understand.

Let’s see, in 2003, monetary liquidity in public hands stood at Bs. 18.7 billion. Eight years later it stands at Bs. 295 billion. That is an increase of 1,577 %. An increase of almost 16 times more bills, coins, however you want to imagine or count them.

Is the country producing 15 times more?

Obviously not, But there is 15 times more money chasing for the same goods, plus the increase in GDP, which is about 50% in that period. So, you have 15 times more money and only about 0.5 more goods.

Guess why there is inflation?

But, they will likely approve this crazy idea and when inflation persists, they will blame the phases of the moon, astrology or El Niño, but somehow they will never imagine that this guy Friedman from the Evil Empire had any clue as to what he was talking about.

But if you don’t get Friedman, just see the picture of the little kid above and you will get the whole picture of what Friedman meant.

(With the increase in the price of the barrel of oil, we are going to be able to invest in housing and security)

These are numbers from Veneconomy in its latest issue on PDVSA’s investment plans:

PDVSA’s updated investment plan calls for US$ 252 billion in investments between 2010 and 2015, to expand capacity by 2.8 million barrels of oil a day.

PDVSA’s share of this will be US$ 192 billion, or US$32 billion per year starting last year.

Last year, PDVSA only invested US$ 11.5 billion, or 35.9% of the target.

In 2011, Ramirez himself said that PDVSA would only invest US$ 12 billion.

Thus, in the first two years, PDVSA will be behind US$ 40 billion in the “plan”

Recall that the earlier “Siembra Petrolera” plan under Ramirez 2005-2010, which was supposed to expand production to 5 million barrels a day, never got off the ground.

It’s all smoke and mirrors, but people like it.

For the past few years, the Chavez Government has been paying anyone that has worked a minimum of 5 years in their lifetime a Social Security pension equals to minimum salary plus four months of bonus per year. At current minimum salary and assuming the official rate of exchange we are talking about Bs. 1,200 (US$ 279 a month) per pensioner, but each pensioner receives Bs. 19,200 per year, equivalent to US$ 4,465 per year. besides the 5 years of employment, you get a pension when you turn 55, if you are a woman, or 60 years old, if you are male.Additionally, survivors are also eligible to receive 100% of the pension of the deceased.

The Chavez Government and the opposition seem to be in a battle to outdo each other in offering even more benefits. Last year, Chavez lowered the minimum number of payments required for nine months, so that more people could receive the benefit. The opposition in turn, made a proposal during the first week of the new National Assembly, asking that pensioners also receive a 10% increase given to them as food stamps, a benefit that most formal workers receive in Venezuela.

At this point, I have to clarify that these pensions don’t come from a “fund”, Venezuela’s Social Security administration has gone broke at least twice in my lifetime. People pay monthly proportionally to their salary, but there is a cap, the cap is around the payment for a yearly pension, but only those making more than 5 minimum salaries a year pay that much.

What I have never been able to figure out is whether the country can afford this. And as far as I have been able to figure out, ever since the old Economic Committee of the National Assembly disappeared, such calculations are not even made. So, both the Government and the opposition are playing populism without having a clue as to whether this makes sense or not.

So, I decided a few weeks ago to throw some numbers and see if this makes any sense.

My starting pint was the INE website, where I found data on how many Venezuelans are above 55 (for females) and 60 for males. This data can be found here, except that for some weird reason, the 55 to 59 group is missing from the table, so I had to do some extrapolation. The result is that there are 1.2 million women eligible by age to this pension, while 716,000 men qualify. That is over 1.9 million Venezuelans. If all of them qualified, the cost would be US$ 8.6 billion a year to pay all of the pensions.

The next step was to figure out how many of those people, given the low five year requirement and the fact that the pension can be inherited by widows and widowers, as well as underage children, which must be a small group, my guess was that around 50% of that population was eligible and collects that pension. Imagine my surprise when I found out that it is 83% of those eligible that receive the pension!

Well, at that rate, it costs the Venezuelan Government US$ 7.145 billion per year to sustain the pension system. I don’t know how much of this comes directly from those that contribute today to the system, but it sounds high to me. Very high. Because this year’s budget at Bs. 4.3 per US$ is US$ 47 billion, so we are talking about 15% of the budget going for pensions. And this number will simply increase every year as more people get older, unless the Social Security system is funded, a project that Chavez killed when he first became President in 1999.

But the opposition is no less irresponsible when it proposes that pensions should be increased. Without knowing whether the system makes any sense, asking for an increase about the minimum salary is not a very responsible position. Unless both the Government and the opposition begin calculating costs and looking into the future, the country’s finances will always be doomed under the management of irresponsible politicians.

And this does not even consider an even more complex question: Is it fair?

I have tried during the last eight and a half years to restrict this blog to Venezuela and related subjects for the simple reason that this is not only the subject of the blog, but additionally because there are so many other significant and important subjects out there, that I did not want to distract attention from my main subject. Thus, I have tended to ignore in my writings, not in my mind or in my readings, other subjects, even when they had something to do with Venezuela.

I am breaking that rule today because of a personal story that made me follow Egyptian politics for the last ten years. Roughly ten years ago, give or take two years either way, well known investor Jim Rogers came through Caracas in his second drive around the world. (His first one was on a motorcycle). It was a very pleasant evening with Jim telling us about his recent experience around the world and asking us about Venezuela, trying to understand Chavez and the dynamics of our country.

At the end, he gave us a sort of overview of the world and he noted that he thought the Middle East was a powder keg and he worried most about Egypt, an explosion waiting to happen, whose impact would change the face of the Middle East forever. Egypt, he said, was the most worrisome, because unlike many of the other important countries in the region, it not only had the most ruthless dictatorship, but it was also the poorest country. His fear was that Egypt would explode and the impact would be felt all over the Middle East, toppling Governments everywhere, including places like Saudi Arabia and Kuwait.

Thus, I have kept up with the somewhat dysfunctional and complex politics of Egypt over the years.

But as the world watches Tunisia and Egypt asking for more freedom, it appears to me that the protesters in both Egypt and Tunisia, know clearly what they don’t want, their current or recently overthrow Governments, but don’t have a clear definition of what they want or where they will end if their protests are effective and succesful.

Because the truth is that while the movements leading the unrest are pro-democracy, freedom and pro-human rights, what lurks in the background is not only more of the same, another strong man looking to control the population, but one that embodies either the militaristic or the religious leader, if not both.

Remember that most of these countries have no democratic tradition and do have a strong religious influence, mostly fundamentalist ones. Thus, it would appear to me that few of these countries are on the road to a democratic Government. Perhaps something like a more benign Dictators will be more like it, but the religious factor clouds any prediction.

Perhaps the military will simply oust Mubarak and replacing him with a string of new military rulers that will promise more freedom, but not deliver it. Perhaps the democratic movement will manage to have the new rulers hold elections. But in the end, the winners of those elections will not be them and under the guise of of a democratic mandate, the people will continue to be repressed and dominated.

It is hard for me to see any other outcome. From what I have learned over the years, the region is sadly unlikely to move into more democracy and freedom. There is simply no tradition of that. Maybe all one can hope is that the new rulers truly strive to improve people’s lives, if only for fear that their stay in power will not be brief.

I hope I am wrong, but as I follow the events in Egypt in fascination, I can’t help but remember other examples where the people knew what they did not want and acted accordingly, only to get an equal or worse alternative.

For now, just remember you are watching history and no matter what the outcome, these historic events will likely change the Middle East region forever.